Stock markets weigh whether US is heading into recession        

Financial markets pricing in more than 75 basis points of cuts in US interest rates in 2023 after data showed US initial jobless claims reached the highest since October 2021 while producer prices rose by less than expected in April

The New York Stock Exchange: Investors are still worried about the US debt-ceiling and stability of the banking industry.

Stock markets were mixed as investors weighed concerns about whether the US was heading into a recession. 

Data showed US initial jobless claims reached the highest since October 2021 while producer prices rose by less than expected in April. 

The figures signal that rate hikes by the US Federal Reserve may finally be having an effect on inflation as the central bank walks a tightrope between reining in rising prices and tipping the economy into a downturn.

“Inflation has peaked and is trending lower as growth weakens,” according to Don Rissmiller, chief economist at Strategas. The data support the case that the US Fed will pause hiking rates, he said, though there are other risks.

“While the US does not appear to be in recession right now, there are some signs of cracks starting to appear, and global pressures remain,” he said. 

Financial markets are pricing in more than 75 basis points of cuts in US interest rates in 2023 after this week’s economic reports. 

“Today’s data is a step in the right direction from the Fed’s perspective,” Kara Murphy, chief investment officer of Kestra Investment Management, said. 

Economic indicators are “moving in the right direction, but none of it is enough to say that the Fed’s job is done”, she added. 

The S&P 500 index fell after the data signalled a cooling jobs market and price inflation. 

However, the Nasdaq 100 index edged higher, with Google-owner Alphabet bolstering the tech-heavy benchmark after it showcased its artificial intelligence tools. 

Disney shares dropped 8.5% after losing streaming service subscribers. Peloton shares slid after recalling 2.2m exercise bikes. 

Sentiment seemed fragile, with investors still worried about the US debt-ceiling and stability of the banking industry. PacWest was the worst performing regional lender after deposits fell last week. 

• Bloomberg